MacNeil asks the court to enter partial summary judgment in its favor as to liability on counts I, II, IV, V, and VI of its Third Amended Complaint and on Cannon's counterclaim. For the reasons discussed below, MacNeil's motion for partial summary judgment on these claims is granted in part and denied in part. MacNeil's motion for summary judgment on Cannon's counterclaim is granted.

I. BACKGROUND

The following facts are not in dispute unless otherwise indicated. MacNeil, a manufacturer and supplier of automotive products including floor liners and mats, is an Illinois corporation with its principal place of business in Downers Grove, Illinois. Cannon is a United Kingdom corporation that manufactures and supplies automobile floor mats. Sometime in 1989, MacNeil and Cannon entered into an oral distribution agreement under which Cannon supplied automobile floor mats to MacNeil for resale to end users in the United States.

In 2004, Hyundai Motors America, Inc., an American affiliate of Korean auto manufacturer Hyundai Motors Corporation, awarded MacNeil a contract to supply Hyundai with composite floor mats, consisting of carpet adhered to a rubber base. The mats were to be installed in Hyundai Tucson vehicles delivered to U.S. ports to be sold in the United States. MacNeil engaged Cannon to manufacture and supply the composite floor mats. Cannon was aware that MacNeil intended to resell the composite mats to Hyundai.

MacNeil was concerned from the beginning of the Hyundai floor mat program about the fact that Hyundai wanted a combination rubber-carpet mat. Before the Hyundai program, Cannon shipped MacNeil defective product on some occasions, and MacNeil's requests for credit for the defective product were accepted by Cannon. In 2001, MacNeil supplied Land Rover with a rubber-carpet mat manufactured by Cannon and experienced adhesion defects with the mat. Although MacNeil claims that Cannon assured MacNeil that it had fixed the adhesion problems, Cannon denies that MacNeil either sought or received such assurances. In its manufacturing process, Cannon used glue, among other methods, to attach the carpet insert to the rubber base of the composite mats. Cannon supplied MacNeil with technical data on the glue.

Given the adhesion problems with the Land Rover mat, MacNeil expressed its reservations to Cannon and was assured that Cannon would do its best to avoid these defects. Cannon's corporate representative testified as follows:

Q. [Y]ou testified earlier that David MacNeil, in early 2004, when the Hyundai program was first started and discussed with Cannon, had told you that he had reservations about doing a carpet rubber mat, correct?

A. Yes.

Q. What did you tell him in response?

A. That I could understand his reservations; we'd never really proven ourselves with any of the carpet program[s], but we would try and do our best for him....

(Robert Peacock Dep., ECF No. 557-1, at 30.)

Cannon sent its first shipment of Hyundai mats to MacNeil on July 23, 2004. The last shipment was sent on May 17, 2006. Altogether, Cannon delivered 98, 895 mats to MacNeil for resale to Hyundai. Starting with the first shipment, the mats exhibited significant adhesion defects. They arrived at MacNeil's facility in Illinois with the carpet not fully glued to the rubber base. Cannon claims that these defects happened "from time to time;" MacNeil states that they happened "nearly always."

From July to September 2006, MacNeil could not come up with a solution to the adhesion problem, its attempted repairs were not working, and Cannon did not send any representative to the United States to try and help MacNeil address the situation despite MacNeil's pleas. On July 4, 2006, Hyundai informed MacNeil that the carpet adhesion issues were so bad that Hyundai was shutting off the entire program. Two days later, Hyundai sent MacNeil an email reaffirming the shut-off of the program and stated: "We have conducted an inspection of 50 mats at each port. We have results back from four of our ports today and 80-100% of the mats inspected exhibit carpet separation."

Ultimately, of the 98, 895 mats that Cannon supplied to MacNeil for Hyundai vehicles, Hyundai returned 16, 722 mats. Approximately 80, 000 carpet-rubber Cannon-manufactured mats have been fitted to Hyundai motor vehicles, and the rate at which owners ...

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